Savers will be hit hard when banks and building societies pass on the rate cuts

Savers should prepare themselves for yet more bad news. Early indications are that banks and building societies will pass on the full 0.5 percentage point cut in Bank of England base rate by the start of next month.

Rates will fall further in the next couple of months if economists are proved correct in their predictions that interest rates will plunge to as low as 2 per cent next year.

This makes fixed-rate bonds paying up to 6.8 per cent before tax - on offer at leading banks and building societies - attractive.

Last week, Saga, where the deposit taker is HBOS, launched a fixed-rate bond paying 5.44 per cent after tax (6.8 per cent before) fixed for six months on £1 or more. It has a new, one-year, fixed rate at 5.24 per cent (6.55 per cent) annually, or you can take the interest monthly at 5.09 per cent (6.36 per cent). The bond is available only to those aged 50 or over.

An actor in a bowler hat is silhouetted in front of the Bank of England during the filming of a television programme in central London September 19, 2008. Regulators brought in rules on Friday to prevent investors profiting from falling financial stocks, helping fuel a furious rally in banks and other stocks battered by the deepening global credit crisis. REUTERS/Luke MacGregor (BRITAIN)

Yesterday, Alliance & Leicester launched a one-year bond at 5.28 per cent (6.60 per cent) through its branches. It is part of Abbey, but has kept its own banking licence, so you have £50,000 cover.

Yorkshire Building Society has launched an internet-based, fixedrate bond paying 5.2 per cent (6.5 per cent) on £100 or more, which runs until December 31, 2010. It will pay interest monthly at Bradford & Bingley, now part of Abbey, pays 5.36 per cent (6.7 per cent) for a year, minimum £1,000.

Anglo Irish, where your money is 100 per cent guaranteed by the Irish government, pays 5.64 per cent (7.05 per cent) for one year or 5.6 per cent (7 per cent) for two years.

If you want 100 per cent security on your money, National Savings & Investments (NS&I) pays a much lower 3.2 per cent (4 per cent) fixed for three years, and Northern Rock 3.6 per cent (4.5 per cent) for a year.

'Last week's 0.5 point cut in base rate is the first in a series of cuts which will take rates down to a very low level of 2.5 per cent, their lowest since 1951,' says Roger Bootle, 5.05 per cent (6.31 per cent). economic adviser to management consultants Capital Economics.

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'They may even fall to their all time low of 2 per cent.'

Savers in variable rate accounts should brace themselves for big falls. Within hours of the base rate cut announcement to 4.5 per cent, NS&I said it was cutting the rate of its popular telephone-based Direct Isa by 0.5 points.

Halifax savings rates are under review while West Bromwich has passed on the 0.5 point cut on some of its accounts - including Base Rate Tracker, Direct Tracker and Oak - from this week.

HSBC savers will see rates cut by 0.5 points from tomorrow.

Savers in lower-paying accounts will suffer the brunt of the cuts - including those where you have to give up to 90 days' notice to get your money out. Banks and building societies have £249billion tied up in these accounts and a 0.5 per cent fall will save them more than £1billion in interest.

These have been replaced by flagship accounts to attract new savers - desperate for cash, they will not be so keen to chop their high-profile rates.

Coventry Building Society has already said it is keeping the rate of its internet-based, easy access 50-Plus eSave account at 5 per cent (6.25 per cent) fixed for a year.